ASB, BNZ, Kiwibank and Bank Direct are among lenders that have raised some or all of rates over the past week.
It is not surprising that lenders and commentators believe that the latest increases to mortgage rates will have an impact on borrowers’ budgets and confidence.
Brendan O’Donovan, chief economist at Westpac says that if mortgage rates were to hold at their current level, household debt servicing on the current stock of mortgage debt would be $750 million higher in two years’ time, as fixed rate borrowers roll onto the higher interest rates.
Annual mortgage interest payments are currently around $10.4 billion.
Wholesale rates, the main factor in determining the cost of fixed rate loans have fallen back slightly from the levels they reached towards the end of March. But the increases, as well as a desire by mortgage lenders to recover lending margins, were sharp enough to drive rates significantly higher.
Signals from industry, the domestic and international economies point to further increases in official rates. Borrowers could see floating rate loans top 10% in coming months.
Two and three-year fixed rates are now at their highest levels since mid-2000.
But with the cost of five-year fixed mortgages also significantly above five year averages – all the major banks are charging 8.6% –longer term fixing has become less attractive than it was earlier in the year. Borrowers who want to avoid paying 10%-plus on a floating rate and who believe that the higher rates rise the harder -and faster - they will fall, may feel more comfortable with a two year or three year rate than a few weeks ago. Others can hedge their bets by splitting debt across short and long terms. If you have spare cash, the return on repaying debt becomes more attractive by the day.
Check and compare today's rates Here. To compare historical rates use our handy graphing tool Here.
